Free DP Download 16 January 2020

Thursday, January 16, 2020

TERROR AND TOURISM: The Economic Consequences of Media Coverage
Timothy J. Besley, Thiemo Fetzer, Hannes Felix Mueller          
CEPR DP No. 14275 | 06 January 2020

Violent events in a destination are followed by sharp spikes in negative media reporting and subsequent reductions in tourist activity. Media coverage of violence has a large independent effect on tourist spending beyond what can be accounted for by controlling for the incidence of violence. The effect of violence and news coverage varies markedly across both destination and origin countries.

These are the central findings of a new CEPR study Timothy Besley, Thiemo Fetzer and Hannes Mueller, which examines the economic effects of news coverage of violent events. They analyse credit card data on tourism spending from 114 origin countries and five tourist destinations – Turkey, Egypt, Tunisia, Israel and Morocco – with a large corpus of more than 446,000 newspaper articles covering news on the five destination countries from a subset of 57 tourist origin countries. Among the findings:   

  • There is robust relationship between the intensity of reporting on violence and subsequent drops in tourism activity. 
  • If media-reporting switches from reporting on topics unrelated to violence to covering only stories about tourists being targeted, then tourism spending drops by about 56% a month later.
  • This effect is persistent, lasting for about nine months following the coverage.
  • Tourists with more information react less to inflammatory media reporting because they have a broader informational base, and this can be an important factor in the overall effect of violence on economic ties.
  • The effect of violence and news coverage varies markedly across both destination and origin countries. 
  • Many individuals may lack the capacity or desire to collect and use all available information and simply take news coverage in their home country at face value. This can produce biased beliefs about the actual safety of danger of a destination since the same event is reported with different degrees of intensity in different countries.
  • About a third of the weight in terms of updating beliefs comes from country-specific news reporting but there is significant heterogeneity across countries and events.

The study shows that the economic impact of violent events on tourism activity is significantly driven by the underlying news reporting, indicating that the media is indeed powerful in affecting international flows of tourists.

Figure 6: Overall aggregated spending patterns of British- and German-issued cards in Tunisia in the wake of the Sousse attack 

Note: The drop in tourism spending is markedly larger for British-issued cards. 

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